Ethereum price drops to 7-month low as data shows more downside.
The price of ether (ETH) fell 7% between October 6 and October 12, hitting a seven-month low of $1,520. Although there was a small recovery to $1,550 on October 13, as indicated by several measures, investor confidence and interest in Ethereum seems to be waning.
Some argue that this activity reflects interest in cryptocurrencies, with Google searches for “Ethereum” hitting a three-year low. However, Ether has underperformed the overall altcoin market capitalization by 15% since July.
Interestingly, this price movement is lower than Ethereum's average seven-day trading fee of $1.80, which is the lowest level in the last 12 months. To put this in perspective, these fees reached over $4.70 two months ago, a price considered high for initiating and closing encapsulated layer-2 transactions.
Uncertainty of regulation and low share of shares will return the decline of the price of ETH
A significant event that affected Ether's price was the announcement by Cardno founder Charles Hoskinson that US Securities and Exchange Commission Director William Hinman signed Ether as a non-secured asset in 2018. On October 8, some kind of “favorism” influenced the regulator's decision.
Ethereum's share price fell from 4.3% to 3.6% in two months as it received less interest from investors participating in the network's validation process. This change was caused by a decrease in activity in the burn mechanism associated with an increase in ETH supply, reversing the trend of scarcity.
On October 12, regulatory concerns escalated, with the Autorité de Contrôle Prudentiel et de Résolution (ACPR), a unit of the French central bank, highlighting the risk of a “paradoxical high level of concentration” in decentralized finance (DeFi). The ACPR report suggests that specific regulations governing smart contract authentication and management are needed to protect users.
The resulting data and TVL drop reflect the bear's control
A closer look at derivatives metrics will provide insight into how professional ether traders are positioned following the price correction. Typically ETH monthly futures trade at a 5%–10% annual premium to compensate for late trade settlement, this practice is not unique to crypto markets.
Ether futures premiums hit a five-month low on October 12, indicating a lack of interest in long positions. Interestingly, even the 8.5% Ether price rally between September 27th and October 1st could not push ETH futures above the 5% neutral limit.
Ethereum's total value locked (TVL) has decreased from 13.3 million ETH to 12.5 million ETH in the past two months, indicating a decrease in demand. This trend shows less confidence in the Diffie industry and less benefits compared to the 5% yield offered by traditional financing in US dollars.
To assess the significance of this TVL failure, metrics related to decentralized application (DApp) usage should be analyzed. Some DApps, including decentralized exchanges (DEXs) and non-fungible token (NFT) marketplaces, are not financially stable, making the set price irrelevant.
Unfortunately, for Ethereum, the fall in TVL is accompanied by a slowdown in the activity of most of the ecosystem's dapps, the leading DEX, Uniswap, and the largest NFT marketplace, OpenSea. The reduced interest is also seen in the gaming sector, with Stargate showing only 6,180 active accounts on the network.
While regulatory concerns are not directly related to Ether's classification as a commodity, they could negatively impact the DApps industry. There is also no assurance that key pillars of the ecosystem, such as ConsenSys and the Ethereum Foundation, will remain untouched by regulatory action, particularly in the United States.
Given the reduced demand for long positions, reduced oversupply, regulatory uncertainties and a widespread lack of demand (as noted on Google Trends), the likelihood of Ether falling below $1,500 is relatively high.
This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
